When it comes to a business investment strategy, there are an endless amount of paths you can take. The long-term investing strategy you decide to use will depend on your overall priorities, needs, and values.
One strategy that has numerous benefits is long-term investing. This involves putting your money in an investment fund with the goal of leaving it there for a long time.
You’re not buying and selling stocks quickly based on the market or trying to take advantage of opportunities. Instead, your money can grow over a long period.
Here are 6 benefits to long-term investing:
1. There is less emotion attached
It’s easy to get emotionally invested in every high and low in the stock market, and worry that you should be moving your money around to take advantage of each trend.
But, when you invest long-term, you don’t have to think about those things. You don’t have to worry like before because you’re focused on the future. With a long-term investment, you’re more concerned with the viability of a company’s business model or its overall growth strategy.
2. Your portfolio will gain value
Over the long term, portfolios tend to grow in value. If you buy and sell based on dips in the market, you could bet right that the stock will or won’t increase in value again, but you could also be wrong. If you stick with your stocks that tend to increase in value and hold onto them, chances are they’ll readjust and continue to increase in value.
3. Lower tax liability
Short-term traders, who have their investments for 365 days or fewer pay higher taxes, whereas long-term capital gains taxes tend to be lower.
If you invest long-term, you’ll likely be paying less in taxes than active traders. That’s more money in your pocket!
4. You’ll pay less in commissions
Active trading can quickly allow commission fees to add up, especially if you’re a day trader. As a result, you could pay thousands of dollars in commissions each year.
If you invest long-term, you may pay a small commission fee a few times a year, but your gains will more than likely cancel out those costs very quickly.
5. You can compound your earnings
Long-term investors enable you to compound or reinvest your profits over time, which can give you even higher returns on your investment.
6. Anyone can do it
Investing long-term doesn’t require as much knowledge and in-depth planning as short term investing.
When you invest long-term, you can invest in a few companies and carry on with your life. You don’t need to be constantly checking the stock market to figure out what you need to buy or sell on a daily basis, and you don’t have to understand a lot about the market or have extraordinary insights. All you need is patience.
There are countless strategies out there that you can use to invest your money, but long-term investing is the easiest, least stressful and requires little expertise.
If you would like tailored advice from an accountant or financial advisor about long-term investing, contact us!
For more tips of long-term investing, click here!